IMF Sees A Bubble In The Canadian Housing Market

A recent report published by the IMF examines the state of the Canadian housing market in a section titled "How Vulnerable is Canada's Housing Market?" Canadian real estate prices quickly bounced back from the 2008 dip. But the IMF thinks they are due for a correction.

Interest rates are very low, so any rate increase would put additional strains on already highly indebted households.

Doug Alexander and Sean Pasternak at BusinessWeek provides even more evidence. Low bond yields have caused lenders to drop mortgage rates to lure borrowers: three of the countries largest banks now offer financing at 2.99 percent. From BusinessWeek:

“Investor-owned condo properties have got to be a cause for concern, just because of supply and demand,” Bank of Montreal Chief Executive Officer William Downe said Jan. 10 at a banking conference in Toronto. Royal Bank CEO Gordon Nixon said “there’s no question” that the condo markets in Vancouver and Toronto are the most vulnerable in the country.

Canadian home sales in 2011 increased 9.5 percent to C$166 billion, they reported, as home prices rose 7.2 percent.